Tag Archives: Wichita city government

Another Wichita survey, another set of problems

The Wichita Eagle editorial board notices problems with a survey gathering feedback on Century II.

What will we learn from a survey gathering public opinion on the future of Century II in downtown Wichita? Not much, according to a Wichita Eagle editorial. 1

The editorial presents evidence from an expert indicating the survey will produce results that “will be neither scientifically valid nor representative of the city as a whole.” The problems lie with the nature of the questions and self-selected participants unlikely to be representative of the city.

I commend the editorial board for bringing this issue to our collective attention. It’s important, and not unprecedented in Wichita. If we look beyond this survey, we’ll find other examples of the same:

  • The Project Wichita survey suffers from the same faults, as I show in Project Wichita survey.

  • In 2014 the city was quite proud of its engagement and positive response regarding the proposed city sales tax. But on election day, 62 percent of voters said no to the tax.

  • In 2013 the city established a website and program called “Activate Wichita.” It was a virtual town hall where citizens and officials could propose ideas and collect feedback. But as I showed, when using the voting system there was no option for expressing disagreement or disapproval with an idea. “Neutral” was as much dissent as Wichitans could express in this system.


Notes

  1. Wichita Eagle Editorial Board. Will Century II survey tell city leaders what Wichitans really think? No. February 15, 2019. Available at https://www.kansas.com/opinion/editorials/article226286910.html.

Naftzger Park costs up, yet again

The cost of fixing an oversight in the design of Naftzger Park in downtown Wichita is rising, and again we’re not to talk about it, even though there are troubling aspects.

Last week the Wichita City Council was scheduled to consider an item regarding the rebuild of Wichita City Council. That item was removed from the agenda the day before the meeting. It now appears on the agenda for the February 12 meeting, and with a higher price tag.

(“Consider” is not quite the right term, as the item was on the council’s consent agenda. That’s where items are passed in bulk, usually without discussion.)

As the city explains in the agenda packet for this week, “Naftzger Park currently has a small pond that acts as a storm water retention facility during rain events. Proposed improvements to Naftzger Park will eliminate the pond and all available storm retention. The project does not include funding for replacing the retention capacity.” The cost is given as $115,000, up from last week’s $85,000.

As explained last week, this seems like a major oversight in the original project plans. The city has regulations regarding stormwater retention that private sector developers must follow. Didn’t any city planners consider these regulations as the project was planned? Didn’t any council member or bureaucrat look at the plans and wonder about stormwater drainage? Wasn’t there a highly-regarded architect designing the park? What about TGC Development, the developer of the surrounding property, to whom the city effectively outsourced the development of Naftzger Park? The construction manager?

Of note: This week the agenda tells us this: “Funding is available for transfer due to the scope of project being adjusted to remove some the structural repairs and the abutment treatment after discussion with the railroad were not successful.” This sounds like structural repairs were planned but not executed. This deserves discussion, but with the item being on the consent agenda, discussion is not likely.

Of further note: The February 5 agenda stated, “Funding is available for transfer due to underruns of bid items upon project completion and favorable bid pricing.” This made it sound like all planned work was completed and the city spent less than budgeted, even if through happenstance. This week we’re being told something different.

Facade improvement program raises issues in Wichita

An incentive program in Wichita should cause us to question why investment in Wichita is not feasible without subsidy.

At its February 5, 2019 meeting, the Wichita City Council will consider an item regarding economic development in Delano. The owner of a building there has applied for financial assistance under the city’s facade improvement program.

The purpose of the facade improvement program, according to city documents, is to provide “low-cost loans and grants” to help improve the appearance of buildings “located in defined areas needing revitalization, including the City’s core area.”

The matter before the council this week is to accept the petition of the property owner and set February 19, 2019 for the public hearing.

Undoubtedly council members will praise the property owner for deciding to invest in Wichita. I’m glad he is, and it sounds like the project will improve the Delano area. But the need for this item raises a few questions regarding public policy in Wichita that are more important than any single project.

First, city documents state: “The Office of Economic Development has reviewed the economic (‘gap’) analysis of the project and determined there is a financial need for incentives based on the current market.” In other words, the city has determined that this project is not economically feasible unless it receives a government subsidy. Will any council members ask why is it not possible to renovate a building in the core of Wichita without subsidy? What factors in Wichita — specifically Delano — make it impossible to have investment like this without subsidy?

Second: Wichita officials, especially Wichita Mayor Jeff Longwell, tell us that the city doesn’t use cash as an economic development incentive. But this proposal includes a cash grant of $30,000. This is not a low-cost loan that must be repaid. Instead, it is an incentive, a gift — and it’s cash.

Naftzger Park cost rising, and we’re not to talk about it

The cost of the Naftzger Park makeover is rising, will be paid for with borrowed funds, and possibly handled without public discussion.

The cost of the Naftzger Park project in downtown Wichita is rising, according to an item the Wichita City Council will consider at its Tuesday February 5, 2019 meeting. According to city documents, an additional $85,000 is needed for stormwater retention, a function the former pond provided.

This seems like a major oversight in the original project plans. The city has regulations regarding stormwater retention that private sector developers must follow. Didn’t any city planners consider these regulations as the project was planned? Didn’t any council member or bureaucrat look at the plans and wonder about stormwater drainage? Wasn’t there a highly-regarded architect designing the park? What about TGC Development, the developer of the surrounding property, to whom the city effectively outsourced the development of Naftzger Park? The construction manager?

The extra cost is proposed to come from savings realized in another nearby project. That requires a waiver of policy, according to the agenda: “Staff requested waiver of City Council Policy No. 2 regarding the use of projects savings to allow this transfer of funds.”

On top of that, this money will be borrowed. An accompanying resolution (number 19-048) provides the authorization: “Section 2. Project Financing. All or a portion of the costs of the Project, interest on financing and administrative and financing costs shall be financed with the proceeds of general obligation bonds of the City.”

Borrowing this money, even though it is a small amount, is a significant public policy issue. The city decided to use tax increment financing (TIF) to pay for this project. City officials pitch this as a method of financing that costs the general public nothing, as the TIF bonds are repaid from a project’s future property taxes.

In this case, as the surrounding development by TGC starts to pay higher property taxes, these taxes would be used to pay for Naftzger Park. (Never mind who pays for the public services the development will consume.)

But now, some expenses of the project have been shifted away from TIF to the general city.

The equitable way of handling this is to charge this expense to the TIF district. Either that, or to the responsible parties whose oversight, we now see, was lacking.

By the way, this item is on the consent agenda, meaning there will be no discussion unless a city council member requests the item to be “pulled” for discussion and a potentially separate vote. (A consent agenda is a group of items that are voted on in bulk with a single vote. An item on a consent agenda will be discussed only if a council member requests the item to be “pulled.” If that is done, the item will be discussed. Then it might be withdrawn, voted on by itself, or folded back into the consent agenda with the other items. Generally, consent agenda items are considered by the city to be routine and non-controversial, but that is not always the case.)

Following, an excerpt from the February 5, 2019 city council agenda:

Background: Naftzger Park currently has a small pond that acts as a storm water retention facility during rain events. Proposed improvements to Naftzger Park will eliminate the pond and all available storm retention. The project does not include funding for replacing the retention capacity.

Analysis: With the elimination of the existing pond, underground on-site storage is necessary to prevent a negative impact on the area storm sewer system and the surrounding developments during rain events.

Financial Considerations: Currently, the Stormwater Utility does not have funding available for these improvements. Staff proposes transferring $85,000 in General Obligation bond funding from the Douglas Underpass project. Funding is available for transfer due to underruns of bid items upon project completion and favorable bid pricing. Staff requested waiver of City Council Policy No. 2 regarding the use of projects savings to allow this transfer of funds. The total budget for the stormwater retention facility would be $85,000 and the revised budget for Douglas Underpass would be $2,015,000.

Wichita mayor promotes inaccurate picture of local economy

Wichita city leaders will latch onto any good news, no matter from how flimsy the source. But they ignore the news they don’t like, even though it may come from the U.S. Census Bureau, U.S. Bureau of Labor Statistics, or U.S. Bureau of Economic Analysis.

In his media briefing today, Wichita Mayor Jeff Longwell cited an article promoting the purportedly recession-proof and growing Wichita-area economy. 1

Based on the article 2 Longwell cited Wichita’s low unemployment rate and growing job count.

One quote from the article highlights Wichita’s low unemployment rate: “In 2018, the city saw unemployment fall to 3.5 percent — the lowest it’s been since May 1999.” Here’s some data regarding this claim:

In the table, we see that the unemployment rate (monthly average) for 2018 is nearly unchanged from 1999. Also nearly unchanged for these 19 years are the civilian labor force and number of jobs. Both values are slightly lower now. This is not “steady job growth.”

The article the mayor relies upon doesn’t reflect the economic reality in Wichita. It isn’t even close. Yet the mayor and other city officials have heavily promoted this article on social media.

Mayor Longwell also said, “We want to celebrate some of our successes because it has not been easy to get here and it’s been very intentional, and the things that we’re doing that help make Wichita a great place to live but more importantly a place where we can ride out a potential recession that may hit the rest of the country at some point in time and we think that’s a great place for us to be right now.”

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Regarding recessions and being “recession-proof:” The usual definition of a recession is two consecutive quarters of declining economic activity as measured by gross domestic product. For the nation, the last recession ended in 2009. For metropolitan areas like Wichita GDP data is not available quarterly. Annual data, however, tells us that since 2011 — well after the end of the last national recession — Wichita has had two separate years in which real GDP declined, 2013 and 2017. 3

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That’s like two recessions in Wichita at a time the national economy was growing. Is that recession-proof?

The mayor also presented a forecast that Wichita will add 2,700 jobs in 2019. The source of this forecast is the Center for Economic Development and Business Research at Wichita State University. 4

For the Wichita metropolitan area economy, adding 2,700 jobs in a year represents 0.9 percent job growth. Is that good? Nationally, the economy is expected to continue strong growth, although perhaps slightly slower than in 2018, in which nonfarm jobs grew by 1.8 percent. 5 Nationally, job growth is forecast at 1.7 percent for 2019. 6 Wichita’s forecast rate of 0.9 percent is 53 percent of the national rate — barely more than half.

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The nearby chart illustrates that since the end of the last recession, job growth in Wichita has been below job growth in the nation as a whole. 7 Generally, job growth in Wichita has been at about half the rate of the nation. In 2017, Wichita lost jobs. Yet, City of Wichita officials tout “steady job growth.”

It’s not only jobs and output. Personal income has grown only slowly. 8

The Wichita metropolitan area population is growing, but at a rate slower than most metro areas. From 2010 to 2017, the Wichita metro area grew in population by 2.3 percent. For all U.S. metro areas, the population growth was 6.5 percent. Of the 382 metropolitan areas, Wichita ranked 245. Considering just the change from 2016 to 2017, Wichita’s population grew by 0.1 percent, ranking 268 of the 382 metro areas. All U.S. metro areas grew by 0.8 percent over the same period.

For net domestic migration, Wichita experienced a loss of 2.9 percent of its population from 2010 to 2017. This ranked 295 among metro areas. For 2016 to 2017, Wichita lost 0.5 percent, ranking 293, nearly unchanged from the larger earlier period. 9

This slow population growth and out-migration is happening at the same time Wichita-area leaders tell us that we have great momentum going forward. But the data — domestic migration, employment, gross domestic product, and personal income — don’t support what our leaders tell us.


Notes

  1. City of Wichita Mayor Jeff Longwell’s Media Briefing January 31, 2019.
  2. Handy, Emily. The 7 Most Recession-Proof Cities in the US. Livability. January 22, 2019. Available at https://livability.com/topics/careers-opportunities/the-7-most-recession-proof-cities-in-the-us.
  3. U.S. Bureau of Economic Analysis, Total Real Gross Domestic Product for Wichita, KS (MSA) RGMP48620, retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/RGMP48620, January 31, 2019.
    The All industry total includes all Private industries and Government. Real GDP by metropolitan area is an inflation-adjusted measure of each metropolitan area’s gross product that is based on national prices for the goods and services produced within the metropolitan area.
    Also: U.S. Bureau of Economic Analysis, Real Gross Domestic Product GDPCA, retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/GDPCA, January 31, 2019.
  4. Center for Economic Development and Business Research at Wichita State University. Wichita Employment Forecast. January 8, 2019. Available at http://www.cedbr.org/forecast-blog/forecasts-wichita/1558-economic-outlook-wichita-2019-january-revision.
  5. Minutes of the Federal Open Market Committee. December 18-19, 2018. Available at https://www.federalreserve.gov/monetarypolicy/fomcminutes20181219.htm.
  6. Yandle, Bruce. Block out the noise: Here’s the 2019 economic outlook. Available at https://www.washingtonexaminer.com/opinion/block-out-the-noise-heres-the-2019-economic-outlook.
  7. Weeks, Bob. Wichita employment to grow in 2019. Available at https://wichitaliberty.org/economics/wichita-employment-to-grow-in-2019/.
  8. “For all metropolitan areas in the United States, personal income rose by 4.5 percent. For the Wichita metro area, the increase was 2.3 percent. Of 383 metropolitan areas, Wichita’s growth rate was at position 342.’ Weeks, Bob. *Personal income in Wichita rises, but slowly. Available at https://wichitaliberty.org/economics/personal-income-in-wichita-rises-but-slowly/.
  9. Weeks, Bob. Wichita migration not improving. Available at https://wichitaliberty.org/economics/wichita-migration-not-improving/.

Wichita jobs and employment, December 2018

For the Wichita metropolitan area in December 2018, jobs are up, the labor force is up, and the unemployment rate is down when compared to the same month one year ago. Seasonal data shows a slowdown in the rate of job growth and a rising unemployment rate.

Data released yesterday by the Bureau of Labor Statistics, part of the United States Department of Labor, shows a mostly improving employment situation for the Wichita Metropolitan Statistical Area.

Total nonfarm employment rose from 296,900 last December to 302,300 this December. That’s an increase of 5,800 jobs, or 2.0 percent. (This data is not seasonally adjusted, so month-to-month comparisons are not valid.) For the same period, jobs in the nation grew by 1.8 percent.

The unemployment rate in December 2018 was 3.4 percent, down from 3.5 percent one year ago.

Considering seasonally adjusted data from the household survey, the labor force rose by 596 persons (0.2 percent) in December 2018 from November 2018, the number of unemployed persons fell by 394 (3.6 percent), and the unemployment rate rose from 3.5 percent to 3.6 percent. The number of employed persons not working on farms rose to 299,120 in December from 298,918 the prior month, an increase of 202 persons, or 0.1 percent.

Click charts for larger versions.

Wichita, a recession-proof city

Wichita city officials promote an article that presents an unrealistic portrayal of the local economy.

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An article promoting the Wichita economy 1 was noticed and promoted by official City of Wichita sources.

A tweet came from the official @CityofWichita Twitter account and reads “We have been named one of the top two recession-proof cities in the nation by @Livability. Wichita was praised for its ability to withstand turbulence in the national economy, steady job growth and the state’s low income-to-debt ratio.” 2

Those who retweeted this include the Wichita Regional Chamber of Commerce, Wichita Economic Dev (“Promoting, building and preserving Wichita’s economic strength to ensure Wichita is the preferred location for new, existing and expanding organizations.”), and Scot Rigby, who is who is Assistant City Manager, Director of Development Services for the City of Wichita. City officials also shared the article of the city’s Facebook page. 3 That post has been shared 169 times.

One quote from the article highlights Wichita’s low unemployment rate: “In 2018, the city saw unemployment fall to 3.5 percent — the lowest it’s been since May 1999.” Here’s some data regarding this claim:

In the table, we see that the unemployment rate (monthly average) for 2018 is nearly unchanged from 1999. Also nearly unchanged for these 19 years are the civilian labor force and number of jobs. Both values are slightly lower now. This is not “steady job growth,” as Wichita officials proclaim.

Regarding jobs, the article states: “In 2019, job growth is predicted to be positive and steady, and the city anticipates adding 2,700 new jobs.” As a source, the article cites an article from KSN News, which states: “For 2019, the job growth is expected to jump modestly by 0.9 percent, meaning 2,700 new jobs are predicted to come to the city.” 4

This is an accurate report of what the WSU forecast said, except it doesn’t come from the Wichita State University School of Business, as the article reports. Instead, the source is the Center for Economic Development and Business Research at Wichita State University. 5

Is 0.9 percent job growth good? Nationally, the economy is expected to continue strong growth, although perhaps slightly slower than in 2018. 6 Nationally, job growth is forecast at 1.7 percent for 2019. 7 Wichita’s forecast rate of 0.9 percent is 53 percent of the national rate.

The nearby chart illustrates that since the end of the last recession, job growth in Wichita has been below job growth in the nation as a whole. Generally, job growth in Wichita has been at about half the rate of the nation. In 2017, Wichita lost jobs. Yet, City of Wichita officials tout “steady job growth.”

It’s not only employment that has been bad news. In 2017 the Wichita economy contracted. 8 Personal income has grown only slowly. 9

We really must wonder what Wichita officials are thinking and where they get their data.

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Notes

  1. Handy, Emily. The 7 Most Recession-Proof Cities in the US. Livability. January 22, 2019. Available at https://livability.com/topics/careers-opportunities/the-7-most-recession-proof-cities-in-the-us.
  2. Twitter, January 22, 2019. https://twitter.com/CityofWichita/status/1087832893274157059.
  3. https://www.facebook.com/cityofwichita/posts/2120892451290077.
  4. KSN News. WSU releases employment forecast for city, state. Available at https://www.ksn.com/news/local/wsu-releases-employment-forecast-for-city-state/1691787634.
  5. Center for Economic Development and Business Research at Wichita State University. Wichita Employment Forecast. January 8, 2019. Available at http://www.cedbr.org/forecast-blog/forecasts-wichita/1558-economic-outlook-wichita-2019-january-revision.
  6. Minutes of the Federal Open Market Committee. December 18-19, 2018. Available at https://www.federalreserve.gov/monetarypolicy/fomcminutes20181219.htm.
  7. Yandle, Bruce. Block out the noise: Here’s the 2019 economic outlook. Available at https://www.washingtonexaminer.com/opinion/block-out-the-noise-heres-the-2019-economic-outlook.
  8. “For 2017, the Wichita metropolitan area GDP, in real dollars, fell by 1.4 percent. Revised statistics for 2016 indicate growth of 3.8 percent for that year. Last year BEA reported growth of -1.4 percent.” Weeks, Bob. Wichita economy shrinks, and a revision. Available at https://wichitaliberty.org/economics/wichita-economy-shrinks-and-revision/.
  9. “For all metropolitan areas in the United States, personal income rose by 4.5 percent. For the Wichita metro area, the increase was 2.3 percent. Of 383 metropolitan areas, Wichita’s growth rate was at position 342.’ Weeks, Bob. *Personal income in Wichita rises, but slowly. Available at https://wichitaliberty.org/economics/personal-income-in-wichita-rises-but-slowly/.

Job growth in Wichita: Great news?

A tweet from a top Wichita city official promotes great news that really isn’t so great.

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The @WichitaEconDev Twitter account is managed by Scot Rigby, who is Assistant City Manager, Director of Development Services for the City of Wichita. Its tagline is “Promoting, building and preserving Wichita’s economic strength to ensure Wichita is the preferred location for new, existing and expanding organizations.”

The tweet observes “great news” in a Wichita Business Journal article reporting on an employment forecast. Wichita jobs are seen to grow in 2019, according to the forecast.

But the Business Journal article didn’t provide any useful context. Once we learn more about what the numbers in the forecast mean, we may want to temper our enthusiasm.

The forecast for Wichita metro area employment in 2019 calls for modest growth of 0.9 percent, according to the Center for Economic Development and Business Research at Wichita State University. 1 This follows growth of 0.8 percent in 2018. 2

Nationally, the economy is expected to continue strong growth. 3

The nearby chart illustrates that since the end of the last recession, job growth in Wichita has been below job growth in the nation as a whole. Generally, job growth in Wichita has been at about half the rate of the nation. In 2017, Wichita lost jobs.

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Of Wichita job growth in 2018, the CEDBR forecast notes, “This marked a return to the level of growth experienced in the Wichita area from 2012 to 2016, after experiencing a contraction in overall employment in 2017.” The average annual rate of job growth for those years in Wichita was 0.83 percent. It was 1.82 percent for the nation, which is 2.2 times the rate for Wichita.

CEDBR also notes, “Wichita’s unemployment rate declined throughout 2018 to a low of 3.5 percent in October 2018, the lowest unemployment rate for the area since 1999.” We should note that this decline is primarily due to a declining labor force in Wichita, rather than robust job growth.

Back to Rigby’s tweet: There is good news — Wichita is not forecast to lose jobs, as it has in the recent past.

But the rate of growth seen for Wichita is not robust, and that’s a serious problem, especially when our officials think it’s good.


Notes

  1. Center for Economic Development and Business Research at Wichita State University. Wichita Employment Forecast. January 8, 2019. Available at http://www.cedbr.org/forecast-blog/forecasts-wichita/1558-economic-outlook-wichita-2019-january-revision.
  2. Employment figures are not available for December 2018, so I use a crude estimate for that month.
  3. Minutes of the Federal Open Market Committee. December 18-19, 2018. Available at https://www.federalreserve.gov/monetarypolicy/fomcminutes20181219.htm.

Wichita migration not improving

Data from the United States Census Bureau shows that the Wichita metropolitan area has lost many people to domestic migration, and the situation is not improving.

The Wichita metropolitan area population is growing, but at a rate slower than most metro areas. From 2010 to 2017, the Wichita metro area grew in population by 2.3 percent. For all U.S. metro areas, the population growth was 6.5 percent. Of the 382 metropolitan areas, Wichita ranked 245.

Considering just the change from 2016 to 2017, Wichita’s population grew by 0.1 percent, ranking 268 of the 382 metro areas. All U.S. metro areas grew by 0.8 percent over the same period.

For net domestic migration, Wichita experienced a loss of 2.9 percent of its population from 2010 to 2017. This ranked 295 among metro areas. For 2016 to 2017, Wichita lost 0.5 percent, ranking 293, nearly unchanged from the larger earlier period.

This slow population growth and out-migration is happening at the same time Wichita-area leaders tell us that we have great momentum going forward. But the data — domestic migration, employment, gross domestic product, and personal income — don’t support what our leaders tell us.

I get it: We want to be optimistic about our future. But a false optimism is dangerous. It makes us complacent, even proud, when actual accomplishments don’t support that. We may be led to believe that what our leaders are doing is working, when it isn’t working. That is dangerous.

Politicians and bureaucrats can’t be trusted to be frank and truthful about this. They want to be reelected and keep their jobs. Their actions let us know they value their jobs more than the prosperity of Wichitans.

Wichita employment to grow in 2019

Jobs are forecasted to grow in Wichita in 2019, but the forecasted rate is low.

The forecast for Wichita metro area employment in 2019 calls for modest growth of 0.9 percent, according to the Center for Economic Development and Business Research at Wichita State University. 1 This follows growth of 0.8 percent in 2018. 2

Nationally, the economy is expected to continue strong growth. 3

The nearby chart illustrates that since the end of the last recession, job growth in Wichita has been below job growth in the nation as a whole. Generally, job growth in Wichita has been at about half the rate of the nation. In 2017, Wichita lost jobs.

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Of Wichita job growth in 2018, the CEDBR forecast notes, “This marked a return to the level of growth experienced in the Wichita area from 2012 to 2016, after experiencing a contraction in overall employment in 2017.” The average annual rate of job growth for those years in Wichita was 0.83 percent. It was 1.82 percent for the nation, which is 2.2 times the rate for Wichita.

CEDBR also notes, “Wichita’s unemployment rate declined throughout 2018 to a low of 3.5 percent in October 2018, the lowest unemployment rate for the area since 1999.” We should note that this decline is primarily due to a declining labor force in Wichita, rather than robust job growth.


Notes

  1. Center for Economic Development and Business Research at Wichita State University. Wichita Employment Forecast. January 8, 2019. Available at http://www.cedbr.org/forecast-blog/forecasts-wichita/1558-economic-outlook-wichita-2019-january-revision.
  2. Employment figures are not available for December 2018, so I use a crude estimate for that month.
  3. Minutes of the Federal Open Market Committee. December 18-19, 2018. Available at https://www.federalreserve.gov/monetarypolicy/fomcminutes20181219.htm.

Wichita employment, November 2018

For the Wichita metropolitan area in November 2018, jobs are up, the labor force is up, and the unemployment rate is down, compared to the same month one year ago. Seasonal data shows a slowdown in the rate of job growth.

Data released today by the Bureau of Labor Statistics, part of the United States Department of Labor, shows a mostly improving employment situation for the Wichita Metropolitan Statistical Area.

Total nonfarm employment rose from 296,700 last November to 302,200 this November. That’s an increase of 5,500 jobs, or 1.9 percent. (This data is not seasonally adjusted, so month-to-month comparisons are not valid.) For the same period, jobs in the nation grew by 1.6 percent.

The unemployment rate was 3.2 percent, down from 3.6 percent one year ago.

Considering seasonally adjusted data from the household survey, the labor force rose by 391 persons (0.1 percent) in November 2018 from October 2018, the number of unemployed persons fell by 8 (0.1 percent), and the unemployment rate was unchanged at 3.5 percent. The number of employed persons not working on farms rose to 298,749 in November from 298,350 the prior month, an increase of 399 persons, or 0.1 percent.

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Starlite loan isn’t needed

The Wichita City Council seems poised to enter an unnecessarily complicated transaction.

This week the Wichita City Council will consider a loan to the operator of the Starlite Drive-In Theater in Wichita. According to city documents, the proposal is for a five-year loan of $200,000 with an annual interest rate of one percent. The city is requiring both a personal guarantee and a letter of credit, presumably from a reputable bank. 1

We have to wonder why the city asks for both a letter of credit and a personal guarantee. When issuing a letter of credit, a bank will be careful. It is, in effect, making a promise to issue credit to a borrower (the operator of the Starlite) if the borrower does not perform according to the agreement with the city. That alone ought to be enough security.

Moreover, if a bank has enough confidence in a customer to issue a letter of credit for $200,000, it would probably make a loan for the same amount. But that would cost more than one percent in interest.

This is really what the city is doing: Reducing the cost of a loan that a borrower ought to be able to obtain on his own.

Given this, why doesn’t the city simply subsidize the interest cost of the loan? I don’t know what rate a bank would charge this borrower, but it might be 12 percent or so. Then the borrower would have interest costs of $24,000 per year as compared to $2,000 per year for the City of Wichita loan. If the city would simply pay the borrower the difference between the two, things would be much simpler for the city. It wouldn’t have to worry about the loan being repaid.

Well, the city shouldn’t have to worry about repayment, because of the letter of credit. But if the borrower qualifies for that, he can also qualify for a loan.

There are other reasons why the city shouldn’t get involved in the Starlite theater, but if it must, let’s try to keep things simple. Based on what we know so far, I don’t think we’re being told the entire story.

Further evidence of lack of transparency is that this matter has been elevated to an emergency. According to city documents, the mayor will make this declaration regarding the enabling ordinance: “I, Jeff Longwell, Mayor of the City of Wichita, Kansas, hereby request that the City Council declare that a public emergency exists requiring the final adoption and passage on the day of its introduction, to wit, December 18, 2018 …” 2

Notes

  1. “The $200,000 loan from the City will be structured to be repaid over five years as an interest only loan with an interest rate of 1% per annum, with quarterly interest payments for the first four years. The borrower will pay one-twelfth of the principal amount plus interest in each month of year five. The borrower is Blake Smith through Starlite, LLC, a Kansas limited liability company. Smith will provide the City with a personal guarantee as well as a letter of credit securing the entire loan. The letter of credit will be structured as a declining letter of credit. If any principal amount of the loan is prepaid, the letter of credit can be reduced by an equal amount. For instance, if $25,000 is paid at the end of year one, the letter of credit may be reduced to $175,000, the remaining balance of the loan.” City of Wichita, Agenda Packet for December 18, 2018. Item V-5.
  2. REQUEST FOR DECLARATION OF EMERGENCY
    REQUEST OF THE MAYOR OF THE CITY OF WICHITA, KANSAS, FOR THE DECLARATION BY THE CITY COUNCIL OF SAID CITY OF THE EXISTENCE OF A PUBLIC EMERGENCY REQUIRING THE ADOPTION OF AN ORDINANCE BELOW DESIGNATED.
    TO THE MEMBERS OF THE CITY COUNCIL OF THE CITY OF WICHITA, KANSAS:
    I, Jeff Longwell, Mayor of the City of Wichita, Kansas, hereby request that the City Council declare that a public emergency exists requiring the final adoption and passage on the day of its introduction, to wit, December 18, 2018 of an ordinance entitled:
    ORDINANCE NO. _____
    AMENDMENTS TO ORDINANCE 50-585 OF THE CITY OF WICHITA, KANSAS, PERTAINING TO HYATT GRANT PROCEEDS FOR COMMUNITY IMPROVEMENT PROJECTS, GRANTS AND GRANT PROGRAMS
    The general nature of such public emergency lies in the need to pass and publish this ordinance to authorize the release of funds for the purchase of special digital projection equipment and for costs related to its installation for Wichita’s Starlite Drive-In, which was recently purchased by an anonymous buyer to prevent its closure.
    It is therefore expedient at this time that the City Council find and determine that a public emergency exists by reason of the foregoing and that the above entitled Ordinance be finally adopted on the day of its introduction.
    Executed at Wichita, Kansas on this day of December 18, 2018.
    MAYOR OF THE CITY OF WICHITA, KANSAS. ibid.

Sedgwick County tax exemptions

Unlike the City of Wichita, Sedgwick County has kept track of its tax exemptions.

As part of an effort to increase efficiency and management of Sedgwick County government, former county manager Michael Scholes implemented numerous changes, as detailed in the document Efficiencies in Sedgwick County government. One management accomplishment was described as this:

Developed a tax system and business intelligence query to identify Industrial Revenue Bonds (IRB) & Economic Development (EDX) tax exemptions and report foregone property tax revenues for Governmental Accounting Standards Board (GASB) 77 reporting. The report provides the ability to report by tax authority, company, and real or personal property for one (1) or up to four (4) years. Prior reporting was time consuming and error prone; requiring manual data entry into Excel spreadsheets.

The county has not made this report available on its website. To access this report in an alternative manner, click here

The City of Wichita, to my knowledge, does not provide information like this, except as a total amount in the city’s Comprehensive Annual Financial Report (CAFR). (The city and county numbers are not in agreement, and by a large amount.)

Of note, the mayor’s page on the Wichita city government website holds this: “Mayor Longwell has championed many issues related to improving the community including government accountability, accessibility and transparency …” So far, the mayor’s leadership and stewardship has not produced this level of information.

Of further note, a majority of the Sedgwick County Commission decided to fire Michael Scholes.

On big contracts, Wichita has had problems

As Wichita prepares to award a large construction contract, let’s hope the city acts in an ethical manner this time.

As the Wichita City Council prepares to make a decision regarding a contract for the new baseball stadium, the council’s past reputation in these matters can’t be overlooked.

The controversy over the stadium contract has been covered by the Wichita Eagle: “The Wichita City Council hasn’t officially approved a design-build team for the city’s new $75 million Minor League ballpark, but there’s already been a protest over the recommended group. … At issue in a protest by a competing team is whether the JE Dunn team meets a key requirement to be selected, which is that it has built at least three similar Major or Minor League ballparks.” 1

The biggest potential for unethical behavior comes from Wichita Mayor Jeff Longwell. In 2012, as the Wichita city council was considering the award of the contract for the new airport terminal, Longwell (then a council member) received campaign contributions from executives of Walbridge, a Michigan construction company partnering with Key Construction to build the new Wichita airport terminal. 2

Two Walbridge contributions were made on July 16, 2012, the day before the council, Longwell included, voted to award the contract to the Key/Walbridge partnership. More contributions from Walbridge arrived on July 20, according to Longwell’s campaign finance reports.

When questioned about the Michigan contributions, Longwell told the Wichita Eagle, “We often get contributions from a wide variety of sources, including out-of-town people.” But analysis of past campaign finance documents filed by Longwell showed just three out-of-state contributions totaling $1,500. 3

In deciding the airport contract issue, the council was asked to make decisions involving whether discretion was abused or whether laws were improperly applied. It’s not surprising that Jeff Longwell made these decisions in favor of his campaign contributors. But he shouldn’t have been involved in the decision.

That was not the first time Jeff Longwell has placed the interests of his campaign contributors ahead of taxpayers. In 2011 the city council, with Longwell’s vote, decided to award Key a no-bid contract to build the parking garage that is part of the Ambassador Hotel project. The no-bid cost of the garage was to be $6 million, according to a letter of intent. Later the city decided to place the contract for competitive bid. Key Construction won the bidding, but for a price $1.3 million less.

It’s not only Longwell with problematic behavior in the past. In 2012, before the vote on the airport contract, executives of Key Construction and spouses contributed heavily to the campaigns of both Wichita City Council Member Lavonta Williams (district 1, northeast Wichita) and Wichita City Council Member James Clendenin (district 3, southeast and south Wichita). These contributions were not known to the public until months after the vote was cast.

Williams is no longer on the council, but Clendenin remains.

Former Wichita Mayor Carl Brewer had his own issues, with a curious set of ethics principles. 4

The city needs an adult in the room. That person is, or should be, Wichita city manager Robert Layton. In the past he has implemented policies to end the practice of no-bid contracts. We don’t know what will happen this week.


Notes

  1. Rengers, Carrie. City selects ballpark design-build group; competing bidder questions qualifications. Wichita Eagle, November 29, 2018. Available at https://www.kansas.com/news/business/biz-columns-blogs/carrie-rengers/article222372330.html (subscription may be required).
  2. “A campaign finance report filed by Wichita City Council Member Jeff Longwell contains contributions from executives associated with Walbridge, a Michigan construction company partnering with Key Construction to build the new Wichita airport terminal. … These contributions are of interest because on July 17, 2012, the Wichita City Council, sitting in a quasi-judicial capacity, made a decision in favor of Key and Walbridge that will cost some group of taxpayers or airport customers an extra $2.1 million. Five council members, including Longwell, voted in favor of this decision. Two members were opposed.” Weeks, Bob. Michigan company involved in disputed Wichita airport contract contributes to Jeff Longwell. Available at https://wichitaliberty.org/wichita-government/michigan-company-involved-in-disputed-wichita-airport-contract-contributes-to-jeff-longwell/.
  3. “Analysis of Longwell’s July 30, 2012 campaign finance report shows that the only contributions received from addresses outside Kansas are the Walbridge contributions from Michigan, which contradicts Longwell’s claim. Additionally, analysis of ten recent campaign finance reports filed by Longwell going back to 2007 found three contributions totaling $1,500 from California addresses.” Weeks, Bob. Jeff Longwell out-of-town campaign contributions. Available at https://wichitaliberty.org/wichita-government/jeff-longwell-out-of-town-campaign-contributions/.
  4. Weeks, Bob. The odd ethics of Wichita Mayor Carl Brewer. Available at https://wichitaliberty.org/wichita-government/odd-ethics-wichita-mayor-carl-brewer/.

It’s not the bonds, it’s the taxes

A Wichita Eagle headline reads “Wichita aircraft supplier plans 45 new jobs with $7.5 million bond request,” but important information is buried and incomplete.

According to the agenda packet for the December 4, 2018 meeting of the Wichita City Council, a local aircraft supplier is “requesting issuance of bonds” worth $7.5 million. 1

Even if you read the entire Wichita Eagle article2 on this matter, you wouldn’t really learn much about this item. You might think the city is lending the company this money, which many people assume is the purpose of the Industrial Revenue Bonds program. But in the IRB program, the city lends no money, nor does it guarantee repayment of the bonds. 3

Instead, the purpose of the IRBs is to convey a tax holiday. In the very last paragraph, the article mentions this property tax abatement, but no dollar value is given, even though the “city documents” presumably used as a source for this story clearly state the dollar values. The sales tax exemption is also mentioned, with no dollar value given. City documents don’t hold that, either.

The value of the tax holiday, according to the city, is estimated at $82,040 annually for up to ten years, shared among local taxing authorities thusly:

City of Wichita: $22,837
State of Kansas: $1,050
Sedgwick County: $20,575
USD 259 (Wichita school district): $37,578

For the value of the sales tax exemption, no value is given. By city documents state the purpose of the bonds is to pay for “$4,000,000 for new machinery and equipment.” Sales tax on that would be $300,000. If the entire $7.5 million is spent on taxable purchases, sales tax savings would be $562,500.

Why doesn’t the Wichita Eagle mention some of these important matters?

The article also holds no mention of the important public policy issues involved. For example, why does the owner of the business want to escape paying the same taxes that (nearly) everyone else must pay? This question is especially pertinent as Kansas is one of the few states in which even low-income households pay the full sales tax rate on groceries.

Perhaps the reason is that the cost of government makes this investment unprofitable. If that is true, we have a grave problem. If the city must issue bonds and create a tax holiday for this rather small investment, we have a capacity problem. A reader on Facebook left this wry comment to the Eagle story: “So, local area population 600,000+ people … About to add 45 jobs over 5 years?”

The city justifies tax giveaways like this by using a benefit-cost analysis. That is, if the city gives up some taxes, it will receive even more in additional taxes. This analysis is useful to politicians and bureaucrats. But the analysis is valid and meaningful only if the investment is impossible without the tax giveaway.

The question then becomes: Is this tax forgiveness necessary? City documents don’t say. Showing necessity is not a requirement of the IRB incentive program. We’re left wondering if the tax expenditure, which is potentially more than one million dollars over ten years, is truly needed.

The city is proud of its requirements that the benefit-cost ratio must be at least 1.3 to 1. But for USD 259, the Wichita school district, the ratio is 1.17 to 1. So the city is pushing an “investment” on the school district that is below the standard it requires for itself. The school district has no say in the matter, based on Kansas state law. Note also that the school district gives up the most tax revenue, 1.6 times as much as the city.

By the way, Wichita Mayor Jeff Longwell says the city is no longer using cash as economic development incentives. But when the city waves a magic legislative wand and says you don’t have to pay $82,040 per year in property tax, how is that different than giving the same amount in cash? Or when the city says don’t bother paying the sales tax on this, how is that different than giving a cash discount?

The answer is there’s no difference. The mayor, city council members, and city bureaucrats hope you won’t notice the sleight of hand, that is, skillful deception. And with the Wichita Eagle being the watchdog, there’s little chance very many people will be informed.


Notes

  1. City of Wichita, agenda for December 4, 2018. V-2: Public Hearing and Issuance of Industrial Revenue Bonds, Etezazi Industries, Inc. Available at http://www.wichita.gov/Council/Agendas/12-04-2018%20Agenda.pdf.
  2. Siebenmark, Jerry. Wichita aircraft supplier plans 45 new jobs with $7.5 million bond request. Wichita Eagle, November 30, 2018.
  3. “Industrial Revenue Bonds are a mechanism that Kansas cities and counties use to allow companies to avoid paying property and sales taxes.” Weeks, Bob. Industrial revenue bonds in Kansas. Available at https://wichitaliberty.org/kansas-government/industrial-revenue-bonds-kansas/.

Sedgwick County income and poverty

Census data show Sedgwick County continuing to fall behind the nation in two key measures.

Data released today from the United States Census Bureau through the Small Area Income and Poverty Estimates (SAIPE) Program shows Sedgwick County median household income continues to fall farther behind the nation.

In 1989, median household income in Sedgwick County was greater than that for Kansas and the nation. In 2017, however, Sedgwick County has fallen behind both.

In 1989, the all-age poverty rate in Sedgwick County was less than the national rate, but now it is higher.

As can be seen in the nearby charts produced by the Census Bureau’s visualization tool, the trend in economic performance between Sedgwick County and the nation started diverging around the time of the last recession. As time passes, the gap between the two generally grows larger, with Sedgwick County falling farther behind.

Courtesy U.S. Census Bureau. Click for larger.
Courtesy U.S. Census Bureau. Click for larger.

Wichita employment, October 2018

For the Wichita metropolitan area in October 2018, jobs are up, the labor force is up, and the unemployment rate is down, compared to the same month one year ago. Seasonal data shows a slowdown in the rate of job growth.

Data released today by the Bureau of Labor Statistics, part of the United States Department of Labor, shows a mostly improving employment situation for the Wichita Metropolitan Statistical Area.

Total nonfarm employment rose from 296,900 last October to 299,000 this October. That’s an increase of 2,100 jobs, or 0.7 percent. (This data is not seasonally adjusted, so month-to-month comparisons are not valid.) For the same period, jobs in the nation grew by 1.7 percent.

The unemployment rate was 3.3 percent, down from 3.5 percent one year ago.

Considering seasonally adjusted data from the household survey, the labor force rose by 719 persons (0.2 percent) in October 2018 from September 2018, the number of unemployed persons rose by 283 (2.7 percent), and the unemployment rate was unchanged at 3.5 percent. The number of employed persons not working on farms rose to 298,219 in October from 297,783 the prior month, an increase of 436 persons, or 0.1 percent.

Click charts for larger versions.

WichitaLiberty.TV: Economic development incentives

In this episode of WichitaLiberty.TV: A look at some economic development incentive programs in Wichita and Kansas. Second in a series. Tax increment financing (TIF) is prominent in this episode. View below, or click here to view at YouTube. Episode 219, broadcast November 25, 2018.

Shownotes

Sedgwick County jobs, second quarter 2018

For the second quarter of 2018, the number of jobs in Sedgwick County grew slightly slower than the nation.

Data released today from the Bureau of Labor Statistics, part of the United States Department of Labor shows an improving labor picture in Sedgwick County, growing at a rate 80 percent of the nation.

For the second quarter of 2018 there were 12,600 establishments in Sedgwick County employing 250,800 workers. That is an increase in jobs of 1.2 percent from the same time the previous year, a proportional rate which ranked 176 among the nation’s 349 largest counties. For the same period, the national job growth rate was 1.5 percent. (Ranked by employment, Sedgwick County is the 123rd largest county.)

These are figures from the Quarterly Census of Employment and Wages program.

The average weekly wage was $882, an increase of 2.7 percent over the year, that change ranking 204 among the same 349 largest counties. The U.S. average weekly wage was $1,055, increasing by 3.4 percent over the same period.